Chinese stocks are experiencing a remarkable surge, marking one of the most impressive recoveries in recent history. After a prolonged period of decline, the markets have seen a significant rally for nine consecutive days, largely driven by robust government stimulus measures that are enticing investors back into a market that was once considered severely beaten down.
On September 29, 2024, the CSI 300 Index witnessed a staggering increase of up to 6.5%, the highest daily gain since 2015. This surge comes on the heels of a week of gains, with the index rebounding over 20% from its low in mid-September—placing it well within reach of a technical bull market. Last week’s performance has been noted as the most significant since the financial crisis in 2008.
This resurgence of the Chinese stock market can be attributed to various supportive government policies. Among these are relaxed regulations for homebuyers in major cities and a reduction in mortgage rates from the central bank. These steps are part of a comprehensive stimulus package intended to provide liquidity support to the stock market and encourage consumer spending.
The market’s newfound vigor is reflected in trading volumes, as combined turnover on the Shanghai and Shenzhen exchanges exceeded one trillion yuan ($143 billion) shortly after trading commenced on Monday. Experts suggest that the speed and magnitude of this recovery are indicative of how oversold the market had become, and many investors are expressing optimism that this momentum could be sustained.
Charu Chanana, a global markets strategist at Saxo Markets, noted that the current turnaround reflects investor confidence in the government’s commitment to stimulate the economy. Major brokerages like Citic Securities have seen significant gains, especially as nearly all CSI 300 constituents reported positive performance during this rally.
Moreover, the “fear of missing out” phenomenon appears to be influencing foreign investors as well, as hedge funds pivot from US tech stocks to investments in mining and materials sectors linked to the Chinese market.
Market analyst David Chao remarked, “The euphoric surge we observed last week could evolve into something more significant and enduring, thanks to a notable policy shift that addresses the cyclical challenges of the last three years.” He emphasized that, while the execution of these new policies will be closely monitored, the signs indicate a favorable direction for the market moving forward.
As the world watches this intriguing development in the Chinese stock market, many are keen to see how these strategies will unfold and whether they can lead to a more robust and resilient economic environment in the long term.